A week when all the markets showed a net loss with four down days to one up day, and the up day was pretty weak.

I must admit that this rally has gone up more that I expected. I said a few weeks back that I would be surprised if it went past 4200, but as you can see from the chart above it made an intraday high very close to 4500.  The green line is the 200 day moving average, the red line the 72 day moving average and the blue line the 12 day moving average.  What does the chart tell us about future direction?  Any thing you want.  That’s the trouble with charts, they are very good at telling you what has happened, but what will happen is up to the market.  If this is indeed the top of this rally it should be noted that it failed to reach the previous high of 4600.  This would suggest that the next test will be of the 4000 support.  If that fails to hold then the previous low of  3500 comes onto the radar.  But who knows, in this environment of massive government intervention – anything could happen, however I still think a new low below 3500 is on the cards in the next year or so.  Only time will tell.

Headlines from the US have been negative, here are a few I noted.

“Rising Credit Card Losses are the next challenge for Banks.” Credit card losses mirror the unemployment rate.  The recent stress test for banks put probable losses at $82.4 billion, but management consultant firm Oliver Wyman says losses could reach $141.5 billion by 2010, or if off balance sheet holdings are included, $186 billion. Ouch!

“Experts say GM bankruptcy almost inevitable”.  “Chrysler bankruptcy may take up to two years” (What did I tell you.)

There are many more I could quote, but already this is getting too long.  The conclusion I draw from this is that the “green shoots” of recovery the pundits are talking about are weeds.